Preserving Competition in an All-IP World

FCC: You mentioned a number of objections for the transition, and one word that I did not hear but I’m sure you would want to speak about is competition… How would you see as we move forward into an environment where we essentially have two wires running into homes the same way copper wire and in some cases coax and some cases fiber, relatively small fraction at the moment, how do you ensure competition in an environment such as that going forward in an all-IP environment?

Boucher: Well I think that’s one of the issues the Commission will need to look at as it conducts its proceedings and we have a national dialogue convened by the commission on this subject as part of that consolidated proceeding. But I would just comment that in 1996, as part of the Telecom Act, we adopted an interconnection provision in section 251 of the Act, and we basically said in that section that it was a good thing to try to stimulate competition in local telephone service. That was one of our key purposes in adopting the Act to begin with. And as a way to do that we acknowledged that there was at that point a wire going into the home over which phone service was being offered. It wasn’t being offered over the cable infrastructure at that time. And we said that if a competitive company wanted to offer local telephone service, it could have access to the telephone company’s network at any point in the network. If it needed switching capabilities, it could have access to the switch. If it needed transport in order to get to the home, it could have access to the lines that lead into the home. If it needed both switching and access, it could access both.

Just to make sure it really worked, the competitive companies were given a bargain basement rate for that access. They didn’t have to pay in that rate anything for the historical development costs of the network, which of course represented all of the investment that had gone into the network at that time. That wasn’t part of the calculation. They were able to pay the telephone company for access just at a rate that equaled the incremental cost of adding that competitor to the network. It was a subsidized rate, and the telephone company was in effect then subsidizing its competitor’s access on its own network.

Now, at the time that seemed sensible to do because we wanted competition to come into the market. That was the goal. It was anticipated that the competitive companies would acquire customers very rapidly because they could get into the business without having to put their own money into it all, no investment on their part was required. And then once they had gained customers and gained revenues, they would be in position to build their own networks. And so our goal was that you wouldn’t just have two wires going into the home. These competitive companies would then build their own facilities, and what we clearly envisioned was that companies would have other wires going into the home that they would maintain themselves. And that investment would benefit the economy and it would also benefit telecommunications delivery. You would have multiple choices on a facilities based investment by these competitive companies, competing directly with the telephone company and cable company.